You live in a town with 300 adults and 200 children, and you are thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $2,000, but selling an extra ticket has zero marginal cost. Here are the demand schedules for your two types of customers:
To maximize profit, you would charge
for an adult's ticket and
for a child's ticket. Total profit in this case would be
The city council passes a law prohibiting you from charging different prices to different customers.
Now you set a price of
for all tickets, resulting in
Suppose the fixed cost of the play were $2,500 rather than $2,000.Complete the following sentences indicating how this would change your answers to the previous parts.
In the presence of price discrimination, the adult price of a ticket would remain the same/increase/decrease , and the child price would . Total profit would to
If price discrimination were banned and the monopolist continued to produce the play no matter what the profit, the price of a ticket would increase , and total profit would rise/fall to
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